SEC issues new investor alert about bitcoin scams

In a new alert issued today, the U.S. Securities and Exchange Commission (SEC) warned investors about the increased risks of fraud from virtual currency-related schemes. The new SEC alert is an update to their previous cautionary release about virtual currencies, which warned of potential Ponzi schemes using digital money.

Innovations and new technologies are often used by fraudsters to perpetrate fraudulent investment schemes. Fraudsters may entice investors by touting a Bitcoin investment “opportunity” as a way to get into this cutting-edge space, promising or guaranteeing high investment returns. Investors may find these investment pitches hard to resist.

Although focused on bitcoin, the alert is more broadly aimed at preventing any form of tech-based investment scam. As such, it includes a variety of warning signs and common-sense tips to avoid fraud. These warning signs include:

• “Guaranteed” high investment returns. There is no such thing as guaranteed high investment returns. Be wary of anyone who promises that you will receive a high rate of return on your investment, with little or no risk.
• Unsolicited offers. An unsolicited sales pitch may be part of a fraudulent investment scheme. Exercise extreme caution if you receive an unsolicited communication – meaning you didn’t ask for it and don’t know the sender – about an investment opportunity.
• Pressure to buy RIGHT NOW. Fraudsters may try to create a false sense of urgency to get in on the investment. Take your time researching an investment opportunity before handing over your money.

In addition to the fraud warning, the SEC alert reiterated the common regulatory concerns about cryptocurrency investment, such as the lack of oversight, the potential for digital theft and the history of price volatility. Several state-level financial authorities have issued similar warnings in recent weeks.